Council to raise franchise fees

BLYTHEWOOD – Mayor J. Michael Ross announced Friday morning that council is planning to raise the franchise fees that town residents pay on their power and water bills from the current three percent ($3 per $100) to five percent ($5 per $100).

The revelation came during the public hearing section of a special meeting called to grant new 30-year non-exclusive franchise agreements to both Fairfield Electric Coop and Dominion Energy.

Lake Ashley resident Edith Norris came to the meeting with questions about the fee.

“I understand that this fee is collected on our light bill on behalf of the town and that Dominion and Fairfield Electric give this fee back to the town. Is that standard for all the town residents? How much does the town collect and what is that money used for?”

Ross explained that the three percent franchise fee is across the board for all residents in the town and that the town collects franchise fees not just from the power companies, but from insurance companies, Winnsboro water service and other companies that do business in Blythewood.

“This current agreement with the power companies has been in effect since 2001 – 18 years. And it’s remained the same, three percent,” Ross said.

He explained that Fairfield Electric returns about $140,000 in fee collections annually to the town and Dominion returns about $70,000.

“Since there is no taxation in Blythewood, this is one of the few revenue streams we have to operate with,” Ross said. “So all these fees usually go back into the general fund for operating the park, paying employees and other things since there is no tax millage,” he said.

“It’s been three percent for 18 years, so it’s time to go up on the fee, like all the other municipalities have done. Things have gone up more than three percent over 18 years and we don’t have another way to raise money for operating expenses other than building permits and business licenses,” Ross said.

“I understand, but how does a franchise fee differ from a tax?” Norris asked.

“I don’t know,” Ross said, looking to town attorney Jim Meggs for guidance. “It’s just a word,” he said, shrugging.

“It looks like a tax to me,” Meggs said.

“Only the residents who live in the town limits pay the fee,” Norris said. “Before we annexed into the town, we didn’t pay this fee. So, it is a tax, but it’s called a fee.”

“The town requires the power company to collect this fee,” Morgan Harrell representing Dominion, added. ”The power company doesn’t require the town to pay it.”

Meggs weighed in with some clarity on the issue.

“Under our state constitution, municipalities have authority over streets and rights of way inside the town limits. We even have some say about the Department of Transportation’s rights of way,” Meggs said. “The constitution requires that if people use the town’s streets’ right of way, they have to have a consent or franchise agreement with the town. It’s a traditional municipal thing across the state. Counties don’t have franchise authority, so you don’t pay fees in the county.”

“I realize it’s a way of collecting tax,” Norris said, pressing the issue, “but a franchise fee can’t be deducted on my income tax. So why isn’t it called a tax?”

“I don’t know,” Ross finally said. “It is what it is. It gives the town the money it needs to run the town.”

While Norris said that because the town has grown it is therefore collecting more money in franchise fees even though the fee has not increased.

Ross countered that there is more work to do and pay for when there are more people in the town. He said it is not final that the fee will be raised to five percent. He said it may only go up one percent.

Harrell pointed out that the town can also raise or lower the fee at any time during the 30-year contract. The fee, she said, is not bound by the contract.

Ross said the new fee will be finalized at second reading and that any change in the fee would go into effect Jan. 1, 2020.